JENNIFER WALKER ELROD, Circuit Judge:
In this case, we must determine whether the Supreme Court's decision in Perdue v. Kenny A. ex rel Winn, ___ U.S. ___, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010) — which curtailed the authority of district courts to award fee enhancements in federal fee-shifting cases — unequivocally, sub silentio overruled our circuit's precedent in the bankruptcy arena. We hold that it did not. Therefore, we AFFIRM.
On December 1, 2008, Pilgrim's Pride Company and six of its affiliates (collectively, the "Debtors") filed for chapter 11 bankruptcy protection. At that time, the Debtors' prospects for a successful reorganization were far from promising. They had lost approximately $1 billion in the fiscal year preceding their bankruptcy filing and were operating at a negative annual cash flow of over $300 million. The Debtors anticipated that unsecured creditors would receive, at best, a debt for equity swap, and that pre-petition shareholders would be left empty-handed.
Upon receiving the bankruptcy court's approval, the Debtors retained CRG Partners Group, LLC to provide William Snyder as their chief restructuring officer and other personnel to assist in their chapter 11 restructuring process. "CRG was highly effective throughout th[e] [restructuring] process and facilitated a number of changes, including the replacement of certain executive officers and the development
With CRG's assistance, the Debtors prepared a bankruptcy plan that was confirmed by the bankruptcy court on December 10, 2009, just over a year after the petition date. The plan was an absolute success. It provided for a 100% return to all of the Debtors' secured and unsecured creditors, and the Debtors' pre-petition shareholders received $450 million in new equity interests.
Once the plan was confirmed, CRG sought the bankruptcy court's approval of $5.98 million in fees calculated in accordance with the lodestar method. CRG also requested approval of a $1 million fee enhancement
After holding an evidentiary hearing, the bankruptcy court found that CRG had provided superior services that contributed to the outstanding results in the Debtors' bankruptcy case. Specifically, the court stated that:
It also concluded "the evidence showed that Mr. Snyder contributed significantly to the superior results in" the case. Nonetheless, the bankruptcy court denied CRG's enhancement request because CRG failed to satisfy the strict requirements of the Supreme Court's 2010 holding in Perdue, 130 S.Ct. at 1662.
CRG appealed the decision to the district court, which held that the bankruptcy court erred in treating the federal fee-shifting decision in Perdue as binding authority in a bankruptcy proceeding. CRG Partners, 445 B.R. at 672-73. Notably, the district court opined that "[i]t is one thing for a court to seek guidance from a case decided in a different context; it is another thing entirely for a court to allow such a case to displace its previously-established precedent." Id. at 672. The district court reversed the bankruptcy court's decision and remanded the case for further proceedings. Id. at 673.
On remand, the bankruptcy court relied on its prior decision in In re Mirant Corp., 354 B.R. 113 (Bankr.N.D.Tex.2006), which held that four specific factors must be satisfied in order for a professional to receive an enhancement pursuant to 11 U.S.C. § 330(a). The bankruptcy court awarded CRG the $1 million fee enhancement after finding that it had met all four Mirant factors. The bankruptcy court then certified its order for direct appeal to this court, and we granted the parties' motions for leave to appeal the order pursuant to 28 U.S.C. § 158(d)(2).
The Trustee raises one issue on appeal. He contends that the district court erred in reversing the bankruptcy court because Perdue narrowly circumscribed the bankruptcy court's discretion to grant fee enhancements. The Trustee requests that we reverse the bankruptcy court's order under Mirant and "reinstate the bankruptcy court's order entered on June 21, 2010 denying the requested bonus under Perdue."
CRG counters that Perdue was not intended to upend our settled precedent concerning fee enhancements in bankruptcy proceedings. CRG requests that we affirm the bankruptcy court's order under Mirant because "Perdue does not control fee enhancement requests in bankruptcy cases."
Before we can reach the merits of the parties' arguments, we first must discuss our: (1) framework for analyzing applications for compensation under the Bankruptcy Code; and (2) case law specifically addressing fee enhancements in bankruptcy proceedings. This discussion is critical to resolving the ultimate question presented in this case: whether Perdue extends to bankruptcy cases.
We begin with a brief review of the relevant precepts that have governed the compensation of professionals employed by the estate for over three decades. First, in the year preceding the enactment of the Bankruptcy Code in 1978, we held that bankruptcy courts must address the following twelve Johnson factors when determining reasonable attorney's fees under the Bankruptcy Act of 1898:
In re First Colonial Corp. of Am., 544 F.2d 1291, 1298-99 (5th Cir.1977) (quoting Johnson v. Ga. Highway Express, Inc. 488 F.2d 714, 717-19 (5th Cir.1974)). We explained that, although the Johnson factors were established in the context of the fee-shifting provision of Title VII of the Civil Rights Act of 1964, "the guidelines we established there are equally useful whenever the award of reasonable attorneys' fee is authorized by statute." Id. at 1299.
We also recognized, however, that the unique nature of proceedings under the Bankruptcy Act of 1898 merited consideration of two additional factors. Id. First, in light of the "strong policy of the Bankruptcy Act that estates be administered as efficiently as possible," bankruptcy courts were required to award fees that were "at the lower end of the spectrum of reasonableness." Id. (quotation omitted). Second, we advised bankruptcy courts to remain vigilant that there were "a number of peculiarities of bankruptcy practice such as the award of ad interim allowances and the possibility that some officers of the court may be furnishing services to the estate in more than one capacity which could lead to the award of duplicative fees or compensation for non-legal services if overlooked." Id.
Next, in another case decided under the Bankruptcy Act, we held that the lodestar
This framework was then slightly modified for cases governed by the Bankruptcy Code. In addition to considering the lodestar and the Johnson factors, bankruptcy courts became required to consult 11 U.S.C. § 330(a), the Bankruptcy Code provision governing compensation of professionals employed by the estate.
The current version of § 330(a) provides, in relevant part, that a bankruptcy court may award "a professional person employed under section 327 or 1103 ... reasonable compensation for actual, necessary services." 11 U.S.C. § 330(a)(1)(A). It also sets forth a non-exclusive list of factors for courts to examine when determining the reasonableness of fees requested by professionals:
11 U.S.C. § 330(a)(3); see also In re Lan Assocs. XI, L.P., 192 F.3d 109, 123 (3d Cir.1999) (explaining that "in spite of the factors enumerated in § 330, many courts continue to employ the twelve factors set forth in Johnson," and holding that "the factors enumerated in section § 330(a) [sic] are not all-inclusive").
Following the Bankruptcy Code's enactment, we made clear that the lodestar, Johnson factors, and § 330 coalesced to form the framework that regulates the compensation of professionals employed by the bankruptcy estate. See Cahill, 428 F.3d at 539-40. Under this framework, bankruptcy courts must first calculate the amount of the lodestar. Id. at 539. After doing so, bankruptcy courts "then may adjust the lodestar up or down based on the factors contained in § 330 and [their] consideration of the twelve factors listed in Johnson." Id. at 540. We also have emphasized that bankruptcy courts have "considerable discretion" when determining whether an upward or downward adjustment of the lodestar is warranted.
However, as we held in Fender, bankruptcy courts must remain mindful that "[f]our of the Johnson factors — the novelty and complexity of the issues, the special skill and experience of counsel, the quality of the representation, and the results obtained from the litigation — are presumably fully reflected in the lodestar amount." Fender, 12 F.3d at 488 (quoting Shipes v. Trinity Indus., 987 F.2d 311, 320 (5th Cir.1993)). Accordingly, those four Johnson factors may only form the basis for an upwardly adjusted fee in rare and exceptional circumstances: "[a]lthough upward adjustments of the lodestar figure based on these [four] factors are still permissible, such modifications are proper only in certain rare and exceptional cases supported by both specific evidence on the record and detailed findings by the lower courts." Id. (quoting Shipes, 987 F.2d at 320); see also Cahill, 428 F.3d at 540 (bankruptcy court must "explain the weight given to each factor that it considers and how each factor affects its award").
With this framework in mind, we now turn to our previous decisions that specifically addressed the reasonableness of fee enhancements in the bankruptcy context. First, in Rose Pass Mines, Inc. v. Howard, which was decided under the Bankruptcy Act, we determined that the bankruptcy court did not abuse its discretion in awarding a 16% enhancement to the fee earned by the debtor's attorney. 615 F.2d 1088, 1092 (5th Cir.1980). After consulting the Johnson factors, the bankruptcy court had awarded the enhancement because the debtor's attorney: (1) provided "excellent services" that helped produce an "unusually good result"; (2) "evidenced a very high degree of expertise and competence in various areas of the law"; and (3) obtained "outstanding results" in the form of a 100% dividend to all creditors. Id. at 1090-92, 1091 n. 6, n. 8. Based on these findings, we held that the 16% fee enhancement constituted reasonable compensation under the Bankruptcy Act. Id. at 1092.
Similarly, in Lawler, we held that it was reasonable under Johnson to enhance the lodestar by 70% based primarily on the contingent structure of counsel's employment as well as on the unusual nature of the case, novel legal questions presented, exceptional results obtained for the estate's creditors, and counsel's "outstanding professional accomplishment" in handling the case. 807 F.2d at 1213. This high praise and significant fee enhancement was justified because the estate's attorneys transformed a valueless estate into one worth approximately $29 million. Id. at 1209. The substantial and unexpected recovery enabled the confirmation of a bankruptcy plan that provided for a 100% return to all creditors and a return of approximately $8.8 million to the previously insolvent debtor. Id. Accordingly, while explicitly acknowledging the Bankruptcy Act's requirement that fees must remain "within the lower spectrum of reasonableness," we held that a 70% enhancement of the lodestar based on the Johnson factors was appropriate.
We recognize that both Rose Pass Mines and Lawler were decided under the Bankruptcy Act. However, notwithstanding the enactment of the Bankruptcy Code, this precedent remains intact. With regard to Rose Pass Mines in particular, we already held as much in Consolidated Bancshares, 785 F.2d at 1249. In that case, the debtor's counsel sought a fee enhancement under § 330 and Rose Pass Mines based on counsel's alleged substantial recovery for the estate. Id. The bankruptcy court denied the enhancement and the district court affirmed the decision. Id. at 1251. We subsequently affirmed, holding that although counsel's efforts were certainly laudable, the bankruptcy court acted within its broad discretion in denying the enhancement. Id. at 1257. Despite this outcome, Consolidated Bancshares is significant because, in rejecting the appellant's arguments, we reaffirmed that bankruptcy courts retain discretion to "enhance[] a fee for a job performed in an excellent manner":
Id. at 1257 (emphasis added). By explaining the current meaning of Rose Pass Mines in a case governed by the Bankruptcy Code, we made clear to bankruptcy courts that our holding remained precedential. And it appears that the bankruptcy courts did not overlook this significant aspect of Consolidated Bancshares as they have continued to rely on Rose Pass Mines even though it was decided under the Bankruptcy Act. See, e.g., In re ASARCO LLC, 2011 WL 2974957, at *36 (Bankr. S.D.Tex. July 20, 2011); In re Nucentrix Broadband Networks, Inc., 314 B.R. 574, 578 (Bankr.N.D.Tex.2004); In re Farah, 141 B.R. 920, 925 (Bankr.W.D.Tex.1992).
Although we have not explicitly reaffirmed Lawler in the same manner as Rose Pass Mines, we have cited the decision favorably in multiple cases that were decided under the Bankruptcy Code, thereby indicating that the decision continues to stand. See In re DP Partners Ltd. P'ship, 106 F.3d 667, 674 n. 29 (5th Cir.1997) (citing Lawler for the proposition that "Johnson and [its] progeny" govern awards of professional compensation pursuant to 11 U.S.C. § 503(b)(4)); In re Anderson, 936 F.2d 199, 204 (5th Cir.1991) (citing Lawler after explaining that bankruptcy courts "ha[ve] broad equitable — and hence discretionary — powers to award attorney's fees"); In re Evangeline Refining Co., 890 F.2d 1312, 1326 (5th Cir.1989) (relying on Lawler when explaining the level of detail that must be included in a fee application). There is also little reason not to extend to Lawler the same favorable treatment that Rose Pass Mines enjoys. Although case-specific distinctions exist, both decisions upheld enhancements of the lodestar because the estate's counsel provided outstanding services that generated exceptional results in the form of a 100% return to all creditors.
Moreover, the continued vitality of Rose Pass Mines and Lawler should hardly be surprising, as § 330(a) is substantially similar to the Bankruptcy Act provision it replaced, and the only material distinction between the relevant provisions supports our reaffirmation of the two cases. See also 3 Collier on Bankruptcy § 330.03[2] ("[M]ost of the criteria are the same and prior [Bankruptcy Act] case law remains relevant.") (emphasis added). When determining reasonable compensation under the Bankruptcy Act, Bankruptcy Rule 219(c)(1) instructed bankruptcy courts to give "due consideration to the nature, extent, and value of the services rendered as well as to the conservation of the estate and the interests of creditors." Rose Pass Mines, 615 F.2d at 1091 (emphasis added). Similarly, as it first appeared in 1978, § 330(a)(1) authorized courts to award "reasonable compensation for actual, necessary services ... based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title ...." Act of Nov. 6, 1978, ch. 3, Pub.L. No. 95-598, § 330, 92 Stat. 2549 (1978). Thus, the only significant shift in the law was that Congress removed the "conservation of the estate" consideration — which required courts to award fees
Our conclusion is also supported by the two compensation decisions we rendered after deciding Consolidated Bancshares. In Fender,
Finally, we most recently analyzed professional compensation in Cahill, 428 F.3d 536. In that case, the bankruptcy court had refused to award the full amount of the $3,758.08 requested by counsel for the chapter 13 debtor, and instead limited counsel's fee award to $1,737.00, which was
Id. at 541. Thus, although we declined to enhance the lodestar, our analysis indicated that enhancements are permissible when warranted by § 330 or the Johnson factors.
In sum, we have consistently held that bankruptcy courts have broad discretion to adjust the lodestar upwards or downwards when awarding reasonable compensation to professionals employed by the estate pursuant to § 330(a). However, this discretion is far from limitless. Upward adjustments, for instance, are still only permissible in rare and exceptional circumstances — such as in Rose Pass Mines and Lawler, where the applicants had provided superior services that produced outstanding results — that are supported by detailed findings from the bankruptcy court and specific evidence in the record.
We now address the focal point of this case: whether the Supreme Court's fee-shifting decision in Perdue unequivocally, sub silentio overruled our circuit's bankruptcy precedent.
In Perdue, the Supreme Court analyzed "whether the calculation of an attorney's fee, under federal fee-shifting statutes, based on the `lodestar' ... may be increased due to superior performance and results." 130 S.Ct. at 1669 (emphasis added). The underlying case dealt with a class action lawsuit commenced by approximately 3,000 children in the Georgia foster care system against the Governor of Georgia and various state officials, alleging violations of their constitutional and statutory rights. Id. The plaintiffs reached a favorable settlement and their attorneys sought to recover their fees from the defendants pursuant to 42 U.S.C. § 1988, which provides, in pertinent part, that "the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs." Perdue, 130
The Supreme Court began its discussion by explaining that the text of § 1988 "[u]nfortunately... does not explain what Congress meant by a `reasonable' fee, and therefore the task of identifying an appropriate methodology for determining a `reasonable' fee was left for the courts." Id. at 1671. The twelve Johnson factors were the first attempt at such a methodology. Id. at 1671-72. However, "[t]his method... `gave very little actual guidance to the district courts,'" and "placed unlimited discretion in trial judges and produced disparate results." Id. at 1672 (quoting Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546, 563, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986) (Delaware Valley I)). The Court then referenced the emergence of an "alternative approach" in the form of the lodestar method, which eventually became "the guiding light of our fee-shifting jurisprudence." Id. (citation omitted). According to the Court, "unlike the Johnson approach, the lodestar calculation is objective... and thus cabins the discretion of trial judges, permits meaningful judicial review, and produces reasonably predictable results." Id. (internal citation and quotation marks omitted).
The Court next summarized the "important rules" from its prior decisions concerning federal fee-shifting statutes that led to its holding in Perdue. Id. "First, a `reasonable' fee is a fee that is sufficient to induce a capable attorney to undertake the representation of a meritorious civil rights case."
The Court then moved to the precise issue presented in the case: "whether there are circumstances in which superior
We further note that Perdue's holding was founded primarily upon justifications that are unique to cases governed by § 1988 or other fee-shifting statutes. For example, the Court explained that the second and third circumstances arise only in rare and exceptional cases because attorneys in fee-shifting cases generally understand that they will not receive attorney's fees or expense reimbursements until the end of a case.
Id. at 1676-77 (footnote omitted).
The Trustee argues that we should extend Perdue to the bankruptcy arena because
In this circuit, we abide by the rule of orderliness. Technical Automation Servs. Corp. v. Liberty Surplus Ins. Corp., 673 F.3d 399, 405 (5th Cir.2012). Under this rule, a panel of three judges may not unilaterally overrule or disregard the precedent that has been established by our previous decisions. Teague v. City of Flower Mound, Tex., 179 F.3d 377, 383 (5th Cir. 1999) ("[T]he rule of orderliness forbids one of our panels from overruling a prior panel."); Dornbusch v. Comm'r, 860 F.2d 611, 612 n. 1 (5th Cir.1988) ("We recognize, of course, that one panel of this Court `cannot disregard the precedent set by a prior panel.'" (quoting Wilson v. Taylor, 658 F.2d 1021, 1034 (5th Cir. 1981))). In order for one panel to overrule another, there must be "an intervening change in the law, such as by a statutory amendment, or the Supreme Court, or by our en banc court." Technical Automation, 673 F.3d at 405 (quoting Jacobs v. Nat'l Drug Intelligence Ctr., 548 F.3d 375, 378 (5th Cir.2008)). Furthermore, we exercise restraint when determining whether a Supreme Court decision has produced an intervening change in the law: "for a Supreme Court decision to change our Circuit's law, it must be more than merely illuminating with respect to the case before the court and must unequivocally overrule prior precedent." Id. (citations, internal quotation marks, and alterations omitted).
We recently followed the rule of orderliness in Technical Automation. In that case, we considered whether the Supreme Court's decision in Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), which held that Article I bankruptcy courts lack constitutional authority to enter final judgment on certain state law counterclaims, should be extended so as to circumscribe the authority of Article I magistrate judges to enter final judgments. Technical Automation, 673 F.3d at 406. Despite acknowledging the "many similarities" between the statutory powers of bankruptcy judges and those of magistrate judges, we declined this invitation to extend Stern. Id. at 406-07. Instead, we held that the rule of orderliness prevented such an outcome because Stern did not unequivocally overrule our contrary precedent:
Id. at 407.
The Perdue opinion illuminates two significant distinctions that exist between the Supreme Court's fee-shifting jurisprudence and our framework for analyzing professional compensation under 11 U.S.C. § 330(a). First, the Johnson factors are personae non gratae in Perdue's eyes. The decision casts them in a negative light, commenting that they provided "very little guidance," bestowed "unlimited discretion
Second, our discussion in II.B., supra, illustrates that bankruptcy courts have discretion to enhance fees for professionals when their superior performance produced outstanding results. And, in accordance with that rule, we have affirmed fee awards that would have been proscribed under Perdue. In Rose Pass Mines, for example, we affirmed the enhancement of an attorney's fee from $85 to $100 per hour "despite [the attorney's] testimony that his maximum fee in bankruptcy matters had been $85 per hour." 615 F.2d at 1092 (emphasis added); see also Consolidated Bancshares, 785 F.2d at 1257 (explaining that fees may be enhanced under Rose Pass Mines "for a job performed in an excellent manner"). This fee award is inconsistent with Perdue, as it does not fall within any of the three circumstances where Perdue permits enhancements based on superior attorney performance. The most notable distinction between the two cases is that Perdue permits enhancements "where the method used in determining the hourly rate employed in the lodestar calculation does not adequately measure the attorney's true market value." Perdue, 130 S.Ct. at 1674 (emphasis added). In Rose Pass Mines, on the other hand, we affirmed an enhancement despite the fact that the attorney was still receiving his market rate before the enhancement was taken into account. 615 F.2d at 1092. Under our current framework, therefore, enhancements are possible in situations not delineated in Perdue.
The question thus becomes whether Perdue unequivocally, sub silentio overruled our bankruptcy framework, which currently permits bankruptcy courts to: (1) consider the Johnson factors after calculating the lodestar; and (2) award fee enhancements in situations that fall outside of the three specific circumstances set forth in Perdue. See Technical Automation, 673 F.3d at 405 ("In the light of our prior panel precedent and our observance of the rule of orderliness, our inquiry turns to whether the Supreme Court's decision in Stern v. Marshall unequivocally, sub silentio overruled Puryear."). We cannot say that it did.
We begin with the obvious: Perdue is a federal fee-shifting case. Perdue, 130 S.Ct. at 1672. The Court made this clear at the outset of the opinion and relied solely on its prior fee-shifting jurisprudence to support its holding. See id. at 1669, 1672-75. The opinion neither explicitly touched on bankruptcy law nor indicated that the Supreme Court intended Perdue to extend to non-fee-shifting cases.
There is also textual support for our decision. Unlike § 1988, which "[u]nfortunately... does not explain what Congress meant by a `reasonable' fee," Perdue, 130 S.Ct. at 1671, § 330(a) provides specific considerations (i.e. the nature, extent, and value of the services) and six factors for bankruptcy courts to consider when determining a reasonable fee. See 11 U.S.C. § 330(a)(3). Section 330(a)(3)'s text also indicates that its list of factors is not exclusive: bankruptcy courts may consider "all relevant factors," including factors not specified in the statute.
We are also persuaded by the fact that the Court's justifications for the holding in Perdue do not transfer to this case. Unlike cases under § 1988, where fee enhancements often come at the expense of the taxpayer, the public's purse is left untouched in bankruptcy proceedings. The Trustee's related argument — that the enhancement comes at the expense of creditors
Likewise, this case does not implicate Perdue's concern that defendants may be unwilling to settle cases when they can be exposed to the unconstrained, subjective discretion of the courts once it comes time to pay the plaintiff's tab. See Perdue, 130 S.Ct. at 1676. That concern makes sense in the § 1988 fee-shifting realm where, contrary to the American Rule, the "prevailing party" may recover fees and expenses from its adversary. This recovery necessarily involves the redistribution of a finite sum of money from the pocket of the adversary into the hands of the prevailing party. On the other hand, enhancements like the one sought by CRG are only paid in the parallel universe where everyone is a winner (e.g. because everyone has received 100 cents on the dollar). In these rare cases, the professionals may potentially receive an enhancement only after transforming a carcass into a cheetah, so to speak, thereby enlarging the pie that is shared by all of the debtor's creditors. In this parallel universe, there is no settling or losing party to protect from the discretion of the bankruptcy courts.
In Technical Automation, we declined to extend Stern v. Marshall to Article I magistrate judges even though there are "many similarities" between the statutory powers of bankruptcy judges and those of magistrate judges. Technical Automation, 673 F.3d at 406-07. Here, there are fewer similarities and significant textual and structural differences between fee-shifting and bankruptcy cases. Given these differences, and the Supreme Court's failure to indicate that Perdue was intended to apply outside of the fee-shifting context, we hold that Perdue did not
There may be sound justifications for implementing a Perdue-like approach to the compensation of professionals employed under § 330, but those justifications must be voiced to our en banc court, the Supreme Court, or Congress. We hold that Perdue did not unequivocally, sub silentio overrule our prior precedent and we are, therefore, bound to apply it. Accordingly, the bankruptcy court's order awarding CRG a $1 million fee enhancement is
AFFIRMED.
807 F.2d at 1211.
478 U.S. at 565, 106 S.Ct. 3088.